Tuesday, April 22, 2014

Sunday, August 28, 2011The Court of Appeal of the State of California, Fourth Appellate District,recently held that a lawsuit against a mortgage lender alleging fraud andrelated causes of action was time-barred, despite the plaintiff'sallegations of continuing violations and fraudulent concealment.

The plaintiff, the mother of minor children, allegedly discovered that herestranged husband carried out a fraudulent scheme in which he createdfalse credit histories for the couple's minor children and purchasedproperties in the children's names. In connection with those purchases,the husband obtained mortgage loans -- at allegedly artificially highinterest rates -- from Wachovia Mortgage Corporation's predecessor("Wachovia").

The plaintiff allegedly discovered the fraud in 2004, and filed a fraudaction against the husband, in the name of her children, in 2005. Thatcase settled. In 2009, plaintiff as trustee for her minor childrenbrought the instant action against Wachovia, alleging fraud as well asrelated causes of action. Wachovia demurred, arguing that the statute oflimitations barred the action. The lower court sustained the demurrer,without leave to amend. The plaintiff appealed.

The plaintiff argued that the statute of limitations period was tolledbecause Wachovia supposedly engaged in continuing wrongful conduct (inthat, among other things, Wachovia continued to assess her fees per theterms of the mortgage), and that Wachovia was equitably estopped fromasserting the statute of limitations because its identity was fraudulentlyconcealed from her. The Court did not accept either argument. It notedthat the plaintiff's complaint "contains no allegations that [Wachovia]did anything wrong after making the fraudulent mortgage loans," anddistinguished the allegations of continuous wrongs by noting that at most,the behavior alleged "may show plaintiff still suffers from the fraudulentloans made in 2000 and 2001."

Here, the plaintiff admitted that she learned of Wachovia's alleged rolein the purported fraud in 2007 - which, the Court noted, gave her time toinitiate an action prior to the expiration of the statute of limitations.Because the plaintiff was not directly prevented from filing a timelyaction, the Court held that her fraudulent concealment argument failed.

Therefore, the Court held that the complaint was time-barred on its face,and affirmed the lower court's decision to sustain the demurrer withoutleave to amend.

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